“(…) house prices in the UK are currently high relative to incomes and rents,” says the latest IMF report on house prices in the UK. More specifically, it says:

“Residential property prices in the UK are elevated relative to incomes and rents. Although house prices declined significantly during the crisis (13 percent), they have recovered substantially, reaching near pre-crisis peak values. Moreover, residential property values are currently about 20 percent above their historical average values of price-to-income and price-to rent ratios.”

“This aggregate trend masks some variation across regions. London remains prime real estate and prices are now 12 percent higher relative to their 2007 peak value. In the South East region, prices have stabilized at around 4 percent above their pre-crisis peak values. By contrast, in the rest of Britain house price inflation is zero, although residential values have stabilized at around 6 percent above their trough values.”

“Overseas investment may be an important factor in driving the rapid increase in London house prices. London receives a constant flow of property investors from across Europe, the Middle East and Asia, who are looking for safe investments to protect their wealth. House purchases by foreigners amounted to 5 percent of total transactions in the UK in 2012, and this represented a 40 percent increase relative to 2010 in value terms.”